Governance for sustainable development
Lonmin’s corporate governance is built on its corporate values and the Lonmin Code of Business Ethics. The Board is guided by accountability, Lonmin’s values and a responsible leadership ethos to oversee the Company’s impact on the environment and society.
Lonmin Plc is a Company incorporated in England and Wales. The Company’s principal business activities are its operations based in South Africa. Lonmin Plc has a primary listing on the London Stock Exchange (LSE) and a secondary listing on the Johannesburg Stock Exchange (JSE) Securities Exchange. The Company therefore adheres to the UK Corporate Governance Code and its supporting guidance (www.frc.org.uk). Lonmin’s share register of majority shareholders (3% or more) can be found at www.lonmin.com.
The Board is the custodian of the Company’s strategic aims, vision and values. It provides entrepreneurial leadership to management within a framework of prudent controls which enables risk to be assessed and managed appropriately. It assesses whether the necessary financial and human resources are, and will continue to be, in place to enable the Company to meet its objectives and ensure that it takes full account of safety, environmental and social factors.
At 30 September 2016, the Board consists of nine members, including the Chairman, five Non-executive Directors (four of whom are independent) and three Executive Directors. Lonmin currently has one female member on the Board, and two of the Directors are Historically Disadvantaged South Africans. Board appointments are made on merit against objective criteria that include skills, experience and personal attributes, including independence of mind.
Detailed information regarding the Board is available in the Annual Report and Accounts 2016.
A comprehensive effectiveness review of the Board, its committees and individual Directors was conducted in the year under review. The review was facilitated by Helen Pitcher of Advanced Boardroom Excellence, who has no other connection with the Company save for this appointment. The effectiveness review involved one-on-one interviews with each Director, the Company Secretary, Assistant Company Secretary and members of the Executive Committee (Exco). In addition, Mrs Pitcher and her colleagues observed several Board and committee meetings, both in the United Kingdom and South Africa, reviewed the material provided by management to the Board and its committees during the course of the year and assessed a range of documents relating to the operation of the Board and its committees, such as the schedule of matters reserved to the Board, the Board’s annual workplan and terms of reference and annual workplans for each Committee.
Our Annual Report and Accounts 2016 provides details of:
- how Board members are selected;
- how we communicate with our shareholders and formally report; and
- the details of our Annual General Meeting (AGM).
The Board delegates some of its functions and authority to committees without delegating its ultimate responsibility for the governance of the Company. In addition to the committees recommended in the UK Corporate Governance Code, the Board has established two other committees to specifically oversee safety and social responsibility matters, the Safety, Health and Environment (SHE) Committee and the Social, Ethics and Transformation (SET) Committee. As with any business, power is also delegated from the Board to the Chief Executive Officer, and through him to the management team via a documented delegation of authority, setting out the responsibilities, decision-making and approval powers of managers at different levels of the enterprise.
More detailed information on these committees, including a full discussion of the Company’s remuneration policy, can be found in the committee reports in the Annual Report and Accounts 2016.
The interaction between the Board, its committees and the management of the Company can be summarised as follows:
The Social, Ethics and Transformation Committee
Lonmin’s SET Committee oversees the Company’s strategy and performance in addressing transformation, empowerment and other social and ethics issues prescribed in South African legislation. The Committee also oversees Lonmin’s inclusive stakeholder engagement and the process of addressing all stakeholder issues. The Committee met four times during the year and the following work was undertaken:
|Governance, regulatory and reporting||
The Safety, Health and Environment Committee
In addition to overseeing the areas of safety, health and the environment, Lonmin’s SHE Committee assists the Board in meeting the commitments of the Sustainable Development Policy. The Committee sets aspirational standards, implements an appropriate culture, ensures robust and independent assurance, and provides advice to the Board on SHE compliance with legal requirements. The Committee meets quarterly and met four times during the year. The following work was undertaken:
|Governance, regulatory and reporting||
Lonmin’s Code of Business Ethics commits the Company to the highest standards of social and business practices and requires that employees and contractors share this commitment, formalising Lonmin’s ethical approach to conducting, managing and regulating all of its business dealings. The Lonmin Code of Business Ethics can be accessed online at www.lonmin.com/about-us/business-conduct.
The SET Committee oversees the Group’s activities in social and ethics matters, to state policies in relation to combating corruption and bribery. Lonmin aspires to embed an ethical culture in the Company through its corporate values and by leading in a way that demonstrates an ethical tone from the top of the organisation.
The Code of Business Ethics defines Lonmin’s stance on conﬂicts of interest, anti-competitive behaviour, lobbying and relationships with government, bribery, insider trading, the receipt of gifts and donations, whistle-blowing and reporting
of corruption or unethical behaviour.
Ethics training is included in induction training, which employees and contractors receive as a pre-requirement to employment. Those employees and contractors in core operations also receive refresher induction training when returning from leave.
Where allegations of misconduct are received, corruption audits are conducted by the internal audit department on the relevant business units. A 24-hour ethics hotline is available to all employees, contractors and community members to anonymously report ethical grievances through formal Company channels. The hotline is operated by an independent third party and the call logging process is designed to protect individual rights, defend whistle-blower anonymity and encourage the true spirit of whistle-blowing. Each call is logged and addressed to the relevant investigations unit, which takes appropriate steps to determine culpability and instate disciplinary action where required.
Consequences for those found guilty of contravening the Code of Business Ethics include dismissal, contract termination and/or legal action.
The main areas of concern investigated relate to vendor fraud and job selling by external syndicates. The Company is in the process of drafting a policy on BEE fronting to address certain allegations in this regard. Furthermore, a cautionary is included in advertisements for job vacancies, which states that Lonmin does not endorse or tolerate unethical or fraudulent behaviour, bribery, insider trading, corruption or job selling, and that such behaviour will be reported to the relevant authorities.
In the year ahead, the internal audit department will continue to raise awareness around fraud and the ethics hotline, focus on preventive controls and deal with violations of the Code of Business Ethics appropriately.
120 cases of alleged unethical behaviour were investigated in 2016, consisting of 32 cases carried forward from 2015 and 88 cases reported in the current year. All reported cases are investigated according to a formal Code of Conduct for Security and Investigations.
Of these cases, 27 are still under review, 58 were unfounded, and 35 were concluded having confirmed inappropriate behaviour. The following disciplinary action has resulted from the 351 cases investigated and concluded in the year:
- 14 cases resulted in dismissals and/or final warnings
- eight vendor contracts were terminated
- two employees were disciplined
- two cases were settled with vendors
- 10 cases were referred to a third party; and
- nine employees resigned prior to conclusion of disciplinary action.
|1||Refer to pie chart: Unethical behaviour cases investigated and conducted.|
|Number of incidents of sexual harassment investigated||1||1|
|Number of whistle-blowing incidents logged through hotline||33||28|
|Number of cases of unethical behaviour reported through other channels (excluding hotline)||71||60|
|Percentage of business units analysed for corruption risks||100%||100%|
Lonmin participates in various local and international bodies that uphold corporate ethical responsibility and sustainable business practices, and we align our conduct with their recommendations and requirements. This includes voluntary membership in various external organisations, initiatives and social charters, including active participation in national and international mining organisations. Those of strategic importance are listed below.
|CDP||Lonmin submitted a CDP report disclosing our carbon emissions for the 10th consecutive year in 2016, based on our carbon emissions for financial year 2015. The CDP (formerly the Carbon Disclosure Project) is an international, not-for-profit organisation that provides a global system for the measurement, disclosure, management and sharing of vital environmental information. In 2016, the Company also submitted a CDP water disclosure report for the third time; the second time for public disclosure.|
|Chamber of Mines||Lonmin’s representation on the Chamber of Mines’ Chief Executive Officer Forum allows it to share in experiences good and bad, successful strategies and leading practices that support safety improvements.|
|EITI||The Extractive Industries Transparency Initiative (EITI) is a global standard that promotes openness and accountable management of revenues from natural resources. Lonmin supports the EITI through our membership of the ICMM. The Company pays tax fully and properly in all jurisdictions in which it operates as a matter of policy.|
|ICMM||The goal of the International Council on Mining and Metals (ICMM) is to improve sustainable development performance in the mining and metals industry. Lonmin is a member and active contributor of the ICMM, shares information with industry peers about our programmes to encourage mutual learning and is indirectly involved in environmental advocacy on issues. Our 15 Sustainable Development Standards align with the ICMM’s 10 principles and the requirements set out in the Position Statements. External assurance of our Sustainable Development Report is in line with the ICMM’s Sustainable Development Framework: Assurance Procedure relating to subject matters 1 to 4.|
|IPA||Lonmin is a member of the International Platinum Group Metals Association (IPA), a non-profit association that represents mining, production and fabrication companies in the PGM industry. The organisation acts as a platform for discussion and information exchange between member companies and the outside world, and serves as an early warning system for the industry by monitoring legislation and industry-related topics.|
|PJDA||Lonmin is a member of the Platinum Jewellery Development Association (PJDA). The aim of this body is to promote the platinum brand within the jewellery market worldwide.|
|SPI||Lonmin is a sponsor of the SEDA Platinum Incubator (SPI) and an active board participant.|
|UNGC||The United Nations Global Compact (UNGC) is a strategic policy initiative to help business align with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption. Lonmin recognises the importance of these principles and endorses them across the various areas of our business.|
|WPIC||Lonmin is a member of the World Platinum Investment Counsel (WPIC). The core focus of this body is to promote the understanding of platinum in the investment market.|
Lonmin’s Audit and Risk Committee is responsible for oversight of internal audit and external assurance procedures to support the integrity of our measurement and data management systems. These procedures set out the internal management and controls of key risks, and enhance the reliability of information used by investors and other stakeholders. Further detail can be found in the Audit and Risk Committee report in the Annual Report and Accounts 2016.
The internal audit department is responsible for providing objective assurance on risks and key internal controls in alignment with the risk management framework. The in-house auditors are supported by the South African arm of PwC, who provide specialist services in connection with matters that would be inefficient to resource internally. Management uses the findings and recommendations from internal audit to devise and implement corrective action plans that are monitored and reported to the Audit and Risk Committee of the Board.
This year, an internal review of the health and safety material focus area for the period 1 October 2015 to 30 September 2016 was completed. The review covered the qualitative and quantitative information presented in this report’s safety and health chapter.
Certain aspects and indicators in our sustainable development reporting have been externally assured to provide the reader with an objective and impartial opinion over the balance and legitimacy of the performance data. This annual external assurance of our safety, health and environmental and social indicators is obtained to align with the ICMM’s 10 Principles of sustainable development and best practice. The SHE and SET Committees of the Board consider and approve the indicators that receive external assurance.